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Los Angeles Times
Apr 18, 2004 - 01:00 AM

by Peter Nicholas and Robert Salladay

Some Are Unsettled by Gov.'s Victory;

Schwarzenegger used his clout to quickly win workers' comp reform, but some note that a 77-page bill passed with little public scrutiny.
SACRAMENTO -- He has used his celebrity to flatter lawmakers into reaching deals, but Gov. Arnold Schwarzenegger deployed a new tactic in pushing through an overhaul of the state's costly workers' compensation system: muscle.

Over the six weeks that talks unfolded, the governor set tight deadlines for lawmakers to act, used the prospect of a November ballot initiative as a weapon to keep negotiations moving, and mused about curbing the Legislature's clout by pushing for a part-time body.

In the end, it worked. Schwarzenegger is to sign a bill in Long Beach on Monday that is expected to wring billions in savings from an insurance system often blamed for causing businesses to flee the state.

Yet even some friendly Republican lawmakers were rattled by the governor's methods. During his campaign, Schwarzenegger promised to end closed-door dealing in the capital.

Yet, the workers' comp revamp "has not been done in an open and transparent manner where the public is going to have the opportunity to provide input," said Assemblyman Keith Richman (R-Northridge).

The legislative conference committee that approved the bill did not receive it until 3:35 a.m. Thursday. Three minutes later, the six-member panel approved the 77-page bill unanimously, with no analysis presented and no copy of the bill given to anyone but the committee chair.

Schwarzenegger conceded the proceedings were murkier than he would have liked, but said he would sacrifice openness if it meant keeping the Legislature from missing deadlines.

"I like the idea of using the stick," he said at a news conference Friday. "And I like the idea of using deadlines. Because why would we hang here for the next two years and negotiate and debate over this issue?"

The governor said he was not about to relent, signaling that he may use the same intimidating practices as he turns to the toughest challenge of his young administration: wiping out a $14-billion budget shortfall.

It's not a new technique, said Elizabeth Garrett, a law professor at USC.

"It reminds me of other instances where people come in from outside an institution and are able -- through changing the dynamics -- to start the process of negotiation, compromise and action where those activities were not present or possible before," Garrett said. "You have to know how to flatter, cajole and also to have threats that aren't too heavy-handed, but are credible -- the threat of the [ballot] initiative and the threat of his popularity."

In his last major skirmish -- winning legislative support in December for a balanced-budget measure and a $15-billion bond issue -- the governor's approach was more conciliatory. He was quick to compromise.

With this deal, Schwarzenegger tested the limits of his power and stood his ground more firmly than in previous negotiations with lawmakers. In part, that was because he faced a problem within his own party. During the debate over a proposed government spending cap four months ago, Republican lawmakers said Schwarzenegger gave too much to Democrats and compromised his fiscally conservative values. The hard-nosed spending restrictions that Republicans had wanted morphed into a more porous balanced-budget amendment to the state Constitution, approved by voters in March.

This time, Schwarzenegger would not compromise when it came to a central Republican tenet: a free market for the workers' comp insurance industry, without caps on premiums.

Assembly Speaker Fabian Nunez, a Los Angeles Democrat, said he believed Schwarzenegger would have been willing to accept rate regulation but the governor knew GOP lawmakers would balk, and he would have looked again like he was bending to Democrats.

"We had a heart-to-heart and he said, 'Look, I can't sell it. I want this, but I can't sell it,' " Nunez said.

Schwarzenegger remembered the conversation differently. In his news conference, he said, "The reality of it is that I have been interested, very much interested, in insurance companies passing on the cost savings. And I told that to Fabian. But I never said that I'm very much interested in rate regulations. So it could easily be that he took that as me supporting rate regulations. I am not going to say that he stretched his imagination, but all I can tell you is that I would never say that I support rate regulation. I only said that I will look at it."

Political analysts say that as a Republican governor who faces a Democratic-controlled Legislature and who is occasionally at odds with conservative voices within his own party, Schwarzenegger can achieve only so much through persuasion. His strength in the Capitol rests with his popularity with voters. So he repeatedly warned lawmakers throughout the workers' comp debate that if they defied him, he would marshal his celebrity in a well-financed campaign to reform the workers' comp system at the ballot box.

"The people are my partner," he said at Friday's news conference.

The messages were not subtle.

To promote his reform initiative, he would periodically break off talks to head to Costco stores in the Los Angeles and Sacramento areas. Before batteries of TV news cameras, he would sign autographs and thank the company employees who volunteered to gather signatures from customers waiting in line.

He also imposed tight deadlines for lawmakers to complete their work. Some were broken, but the most important one was not. The deadline that loomed largest was Friday, when proponents of the governor's initiative were required to submit signatures to the secretary of state's office if they wanted a spot on the November ballot.

That created a scramble in the run-up to the Friday vote. When Schwarzenegger left for a Hawaiian vacation April 2, he said he believed the deal was done. But as he relaxed at a luxury resort on Maui, he got word from his staff that a fragile compromise was in danger of unraveling.

He blamed "special interests," but he held the Legislature accountable. From an outdoor dining table at the Four Seasons Resort, he voiced support for cutting the Legislature back to part-time status, a move that would seriously erode lawmakers' influence.

In reply, Senate President Pro Tem John Burton (D-San Francisco) quipped that it was an odd time for the governor to be "pontificating," given that he was lazing in Hawaii.

Burton said the governor called him up afterward and said, " 'Dat's funny. Pontificate. Like the pope.' Nothing fazes him."

Returning from his trip, Schwarzenegger met with Burton and other legislative leaders April 11 in an effort to revive the talks.

Over the following week, the pressure mounted as lawmakers struggled to beat the approaching ballot deadline and thus stave off Schwarzenegger's proposed initiative, which was tougher than the reform deal the governor was offering.

Schwarzenegger's staff set up a war room in a windowless conference room in the governor's suite of offices. Negotiators survived on M&Ms, peanuts and the governor's special blend of trail mix.

Democratic and Republican staff members, along with top Schwarzenegger aides, sat around the table with their laptop computers, trading drafts as Burton, Nunez and other lawmakers wandered in and out.

The closed process bothered some lawmakers so much they complained that Schwarzenegger was reneging on a campaign promise to make government more open.

Assemblyman Richman said that in the days leading up to the vote, there was so little time to review the bill that he wasn't sure what was in it or whether it was good policy.

Flipping through a 250-page draft that was incomplete, out of sequence and dotted with the author's handwritten notes, Richman said: "It's very important that if we're going to have open government where there is bright sunshine on what we do here in Sacramento, it's critical that a bill that's as important as workers' comp reform has the opportunity for public review and input."

Underscoring the point, a Santa Monica consumer group, the Foundation for Taxpayer and Consumer Rights, went to the Capitol rotunda Friday, offering to make a $1,000 charitable donation on behalf of any lawmaker who could correctly answer 10 questions about the bill.

There were no takers.

Burton, who has been in politics 40 years, said negotiations over worker's comp left him with a throbbing migraine for the two weeks preceding the vote.

"I've never been in my whole legislative career under the pressure that I put myself in," Burton said. "I was fighting to make something I didn't like palatable."

The deal nearly fell apart Wednesday after Burton discovered Schwarzenegger wasn't going to allow workers to pick their own doctors, a key provision sought by unions. When he heard that, Burton said he looked at Schwarzenegger and said: "If we don't have this, we're screwed. I don't even know if I'm going to vote for the bill," and walked out of a meeting.

"I said, 'It's over.' I just looked at him. I was emotionally drained," Burton continued. "Then I went up to my office and just stared at the wall. Then I called in labor" lobbyists and a compromise was reached.

Schwarzenegger relaxed. Later that night, he had a late dinner at the Esquire Grill, his favorite restaurant in the capital, surrounded by aides and his wife, Maria Shriver. He had a cigar in his mouth.

"It's done," a senior aide said, leaving the restaurant.

Time constraints produced some odd moments.

When the legislative conference committee finally received the bill after 3 a.m. Thursday, no one from the public attended the hearing save for a lone man who thumbed through an Assembly journal that listed various committees and bills, chuckling to himself. A lobbyist stood up and moved away from him.

Schwarzenegger conceded that he campaigned for more open government, but said that in this case he had little choice.

The governor said: "I always did campaign and say, 'Let the sun shine in and let the people be aware of what's going on.' " Here, though, "we had to make decisions very quickly."




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